What is GST (Goods and Services Tax)
Goods and Services Tax (GST) is a unified taxation system to be implemented by the Government of India from the 1st July 2017. The GST is intended to replace all the taxes levied by the central and state governments in various forms ie. excise, sales tax, VAT, entertainment tax, luxury tax etc. The bill for the implementation of the GST law has been passed by the parliament of the nation by '142' constitution amendment act 2017, followed by the passage of Constitution 122nd Amendment Bill. The GST is governed and is being monitored by the GST Council and its Chairman is Union Finance Minister of India - Arun Jaitley. Under GST, all the goods and services will be taxed at the rates of 0%, 5%, 12%, 18%, 28%. Apart from these, there is a special rate of 0.25% on rough precious and semi-precious stones and 3% on gold, also an additional cess on sin goods like cigarettes has been incorporated.Read Important Information About GST:
|GST App||GST Tax Rate||GST Enrollment||VAT vs GST|
|GST Invoice||GST Tax Refund||GST Return Filing||GST Impact|
|GST Council Meeting||Pre GST Sale||GST Registration||ARN Number|
History of GST in India
India has waited for a very long time for the implementation of the GST and is now on the verge of implementing it in a week time. However, the way of GST in India was full of thorns and has taken more than one and half decades to pass the bill to make it a reality. Under the reign of Prime Minister Atal Bihari Vajpayee in the year 2000, the very first discussion on GST Law was flagged off. But, even after the recommendations from the various Govt. committees, the Govt. was not able to implement it. The federal structure of the nation, complexity in the procedures of implementation and most importantly the political unwillingness was the major hindrance in the way of GST in India. Moreover, under the current government, in the year 2014, the GST bill was cleared in the Loksabha as a 122nd constitution bill; and in the year 2016, it was passed in the Rajya Sabha as well, hence finally paving the way for GST framework in the country.
We must know that in the year 1954, France became the world's first country to implement GST Law and since then, 159 other countries have adopted the GST Law. Continue Reading
Why is GST so Important?
Right now, the taxation structure in the country is divided in two forms i.e Direct and Indirect Taxes. Direct taxes are levied where the liability cannot be passed on to someone else. For example - Income Tax, Income Tax is paid where you earn the income and you alone are liable to pay the tax on it.
However, in the case of the Indirect Taxes, the liability of the tax can be passed on to someone else. Like, when a shopkeeper pays VAT on his sale, he passes on the liability to the customer. So, in effect, the customer pays the price of the item as well as the VAT on it so the shopkeeper can deposit the VAT to the government. This means that the customer is not just paying the price of the product, but he also pays the tax liability, and therefore, he has a higher outlay when he buys an item.
This happens because the shopkeeper has already paid a tax when he had bought the item from the wholesaler. To recover that amount, as well as to make up for the VAT, he passes the liability to the customer who has to pay the additional amount. This unfair seeming situation (on the part of the customer) cannot be addressed in the current taxation system. But, under the GST a system of Input Tax Credit has been incorporated, which will allow sellers to claim the tax already paid so that the final liability on the end consumer is decreased.
How GST functions?
A nationwide tax reform can't work without strict rules guidelines and provisions. The GST Council has formulated a foolproof method of implementing this new tax regime by dividing it into three categories i.e. CGST, SGST, and IGST. All three are explained below for the better understanding.
CGST: The revenue will be collected by the central government.
SGST: The revenue will be collected by the state governments for intra-state deals.
IGST: The revenue will be collected by the central government for inter-state sales.
In most cases, the tax structure under the GST regime will be as follows:
- For transaction or sale within the state, both the CGST and SGST will be levied, and the revenue will be shared between the Central and the State governments.
- For transaction or sale to another State, IGST will be levied, i.e now only one type of tax needed to be paid for inter-state sales. This will remove the complex tax structure prevailing at the moment for all the interstate sales i.e. Central Sales Tax + Excise/Service Tax.
What will be the influence of GST on the economy?
Every kind of person wants to know about the GST's impacts on the economy. Some people think that it will be negative and some say that GST will have a positive effect. But the sources said that there will be a good impact on the economy due to the following:
- Business cost might be lower.
- Gross Domestic Product will be increased.
- We will gain of competitive pricing.
- Prices of fixed goods and services might be less.
- The Finance Minister Mr. Arun Jaitley said that Gross Domestic Product will be increased by 2 percent. All companies will pay a single tax instead of the multiple indirect taxes.
Advantages of GSTThere are several advantages of GST, some are mentioned below:
- As we all know that the production and distribution of goods and services are rapidly used and consumed. Therefore, the government levies separate taxes for goods and services. The GST will integrate all tax as service and vat tax thereafter you will not have to pay different-2 taxes. GST will reduce the extra burden of taxation.
- There will not be any cost to registered retailers and there will be no extra taxes, therefore any type of business might start at low cost.
By implementing GST India will gain around $15 Million Dollars per year.
- GST will create a transparent and corruption free tax system. At present time, the manufacturer pays a tax when the products move outside from his workplace, and a tax also levies when the retailer sells the products.
- It will help to promote the exports.
- It will also raise employment and boost the growth of India.
- The end of cascading structure of tax is expected to attract more and more foreign investors in the country.
Positive Impact of GST on Indian Economy
- The GST will reshape the indirect tax structure by dissolving majority of indirect taxes like excise, sales and services levies prevailing in the country. This will definitely do away with the complex indirect tax structure of the country, hence will improve the ease of doing business in the country.
- According to the International Monetary Fund, the adoption of the Goods and Service Tax (GST) could help raise Indiaâ€™s medium-term gross domestics product (GDP) growth to over 8 percent and create a single national market for enhancing the efficiency of the movement of goods and services.
- To claim input tax credit under GST, every dealer has an impetus to demand documentation from the dealer behind him in the esteemed tax chain. Thus this new taxation system will be less intrusive, more self-policing, and thus a more successful method for diminishing corruption.
- The Confederation Of Indian Industry (CII) has estimated that the rise in 1 per cent of GDP will lead to the creation of 25 lakhs new jobs. And after the implementation of the GST, the estimated GDP growth will be about 2-2.5 percent, hence paving the way to create at least 50 lakhs new jobs in the country.
Negative Impact of GST on Indian Economy
- Most of the goods and services have been listed under the four broad tax slabs â€“ 5 per cent, 12 per cent, 18 per cent and 28 per cent and in most of the cases it is up from the current level of 15 percent. This increased tax slab has led to fears that inflation could rise in the short term.
- There is no doubt that the current structure of the GST is expected to lead a temporary rise in inflation, but be assured that it will typically last for a year. Because the inflation in the second year after GST implementation will benefit favorably as the numbers would be compared to already-high figures of the first year of implantation.
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|Alcohol/Liquor||Small Business||Nonregistration Firm|
|Cars/Automotive Industry||Garments Industry||Valuation of MRP|
|Gold Jewellery||Petrol/Diesel||Real Estate/Property|
GST Related Articles:
Frequently Asked Questions About GST Bill
Q1: Does all the goods and service are included in the GST?
A: Apart from alcohol, electricity, food items, agricultural products, petrol, diesel and other petroleum products are kept out of the GST ambit. GST council will decide when to include these items within the GST.
Q2: Whom is being trained right now about GST?
A: Right now, there are multiple training sessions being organized, in which traders and government officials are getting appropriate training. They are being trained about the know-hows of tax collection.
Q3: Registered traders under GST will be rated accordingly, so what will be the benefits of this rating system and will the defaulters names be made public?
A: The rating system will give benefits like easy loan procurement and lenient business expansion while on the reverse side, the defaulters with bad rating will be having a tough time. The trader’s community will be knowing the tax evading party which will further impact negatively on his business.
Q4: What will happen to the states which have given benefits under the SEZ to invite industries as the tax benefits will end of the companies running in SEZ? What will happen in the future if any state wants to give benefits?
A: The companies in SEZ will be getting reimbursement in the taxation while the states who had given the tax benefits will continue. But in the future, it will not remain the same, as the state government will have to collect the taxes from them and if it wants to provide benefits, it can pass them from their budget.
Q5: Will there be any negative impact of nonregistration into GST?
A: Not as such, as the big retailer can seel goods to the nonregistered retailer and after submitting the GST of it, he can avail the benefits in future.
Q6: Would the benefits of old tax credit be availed in GST?
A: If there is any credit due to central excise, VAT or any other taxes until 30 June 2017 of the trader, then the credit will be displayed in the credit balance of GST but for this, the trader will have to show the invoice details. In the case of no invoice, only 40 percent credit can be availed.
Q7: Is it necessary to register under GST for employees?
A: If the employers turnover in services exceeds 20 lakh than the registration is compulsory otherwise there is no need for the registration under this limit.
Q8: Who will be liable for the taxes, employer or employee?
A: In the employment system, the employer will be liable to the taxes. Also, the value of the finished goods will be added into the turnover of the employer not in the employees turnover.
Q9: Will there be a decrease in tax terrorism after the GST?
A: According to the format, the trader need not visit the tax office. The exporters will have to do their refund claim online and the payment will be directly received in their bank account.
Q10: Can tax credit be obtained without registration?
A: There is no need for registration for those who have 20 lakh or less turnover but without the registration, there will be no input tax granted. For those who have a turnover between 20 to 50 lakh can opt for a composition scheme. In this, they cannot take the benefits of the input tax.
Q11: What about a grocery store, where there are a lot of products?
A: There is no need to write code for each and every item. Only codes of main five items are sufficient.
Q12: For whom the HSN code is important?
A: In GST, the product classification will be done according to the HSN code. A business entity with less than 1.5 crore turnover is not required to put any HSN code in the invoice. Likewise, the business entity with turnover from 1.5 crores up to 5 crores are required to put 2 digits, and 4 digits for above 5 crores is required. For the importers and exporters, there will be an 8 digit HSN code.
Q13: What if sales are done to a retail consumer?
A: A consumer doesn’t need a tax credit so the details of the sales done towards the retail consumers are not required. According to the tax slab, the details of the overall sales is to be given like details of 5 percent product sales, 12 percent product sales etc.
Q14: Is it necessary to upload the invoice while filing monthly returns?
A: A sales invoice does not need to be uploaded, the taxpayer just has to give details of it. It is only for the traders selling to the other trader or B2B transaction because, in it, he has to take the input tax credit.
Q15: While in GST, a taxpayer has to file the returns every month, so how exactly this tax scheme is easy?
A: Currently, a taxpayer has to maintain different books for the central excise, service tax and VAT etc but in the upcoming GSTN facility, there will be an offline tool just like excel sheet which can be downloaded by the traders. When the traders fill up that sheet, he just has to upload it after the month ending, nothing else requires to be done. While in the composition scheme, the traders need to file the return once in three months. Also this process can be done via smartphone too with a stable internet connection for the downloading and uploading purpose.
Q16: How Many Times We Have to Return File for GST?
If you are looking for how many times we have to return file in a year for GST Tax then this information is for you.
The GST will imply a total of 37 return filings in a year with 3 returns per months accumulating to 36 and one annual consolidated return. Also one must acknowledge, that if the business unit has another branch in different state, than the number will add up with subsequent states. There are multiple forms which are divided with different dates of the month including sales and purchase register forms to file the taxes on time.
Q17: An individual gets VAT return from the airport upon the products he purchased from the foreign. Is there any similar facility for the tourist?
A: yes, we will be providing this service but due to technical capabilities this might be not possible from July 1st.
For the readers, all the basic points for the better understanding of GST has been discussed above. But still, if anyone faces any doubt he/she is free to download GST Helpline App on Android and iOS where you can participate in the discussion forum. Our qualified CA will be happy to help you.